Broad contours of new farm bill begin to emerge

For now, members of a Senate agricultural panel have fleshed out the broad contours of a new bill, though a host of questions remain.
Statements by Collin Peterson, ranking Democratic member of the GOP-controlled House agricultural committee, indicate that lawmakers may end up considering three commodity program options.

Jim Langcuster, Auburn University | Mar 22, 2012

While a new farm bill already is being painted with broad strokes, one expert cautions that all of this will likely be modified by two factors over the next few months — the looming federal budget deficit and the upcoming federal election.

For now, members of a Senate agricultural panel have fleshed out the broad contours of a new bill, though a host of questions remain.

Among these: The future of commodity programs and, more specifically, how to integrate these with conservation programs, especially in these lean fiscal times.

Statements by Collin Peterson, ranking Democratic member of the GOP-controlled House agricultural committee, indicate that lawmakers may end up considering three commodity program options, according to Jim Novak, an Alabama Cooperative Extension System economist and Auburn University professor of agricultural economics.

“Peterson stated this recently, and it seems to have been backed up by other members of his committee,” Novak says.

For now, Novak says it also appears that upland cotton may have its own program, which will be dubbed STAX, an acronym for Stacked Income Protection Plan.

“The program would serve as a revenue insurance-type program,” he says. “It will likely complement current crop insurance, though we’re unsure at this point how much coverage it will provide.

“What is being discussed is a range of between 5 and 30 percent on top of current crop insurance coverage,” he says.

The STAX proposal for cotton reflects the lawmakers’ pervasive concerns about the Brazilian-led World Trade Organization suit and is currently envisioned as a replacement for current program payments. “Whether counter-cyclical payments for cotton will be carried over into the next farm bill as an option seems very unlikely but remains an open question,” Novak says.

Producer would pay subsidized premium

STAX, as it is currently envisioned by the National Cotton Council, “would protect against revenue losses, with the producer paying a subsidized premium,” he says, adding that some deductibles would likely be involved.

Some farm bill observers have expressed concern that there would be a cotton revenue coverage gap.

“At this point, it appears this program would not provide 100 percent coverage,” Novak says.

One advantage of this approach, though, is that it would bring U.S. farm policy in closer compliance with WTO requirements. The comparative generosity of U.S. farm legislation, which has provided a safety net for some U.S. farm commodities, including cotton, has always been a sticking point with some developing countries, especially Brazil.

“One of the driving forces behind this restructuring of cotton crop support is that it may finally satisfy the Brazilians,” says Novak.

As the STAX concept is fleshed out, one challenge will be determining what constitutes revenue loss and what will constitute the group region.

For other eligible crops, what emerges will possibly be a “modified” ACRE type of program, Novak says.

Keeping target prices as an option with whatever program emerges has been discussed. For his part, Novak reads this as maintaining the current CCP program structure, although this ultimately could be modified.

One of the biggest challenges will be integrating new approaches with conservation programs. Some pro-conservation groups have called for the reinstatement of conservation compliance in the new bill.

However this might be accomplished, Novak says it is likely conservation programs will also undergo streamlining due to budgetary pressures.

“There is talk of reducing the current programs down to three or four,” he says, though adding that EQIP and CRP will likely be maintained in some form.

“There is still a lot of support for CRP, though the number of acres may be reduced further.”

As it turns out, some reduction of CRP acreage already has occurred due to market forces, as producers have found it more profitable to bring existing CRP land back into cultivation.

For now, though, Novak says all speculation about the farm bill will remain entirely that — speculation. “The deficit and the budget are huge modifiers that ultimately could change everything.”